In recent years we've seen a surge in wealth management products — a pool of securities (trust products, bonds, stock funds) that have yield that is on average 2 percentage points higher than bank deposits, and that are sold as low-risk investments but often are not so — as investors search for yield.

We have previously talked about steps that China has taken to liberalize interest rates, and pointed out that one of the most important steps would involve scrapping the ceiling on deposit rates.

In the absence of higher returns on their savings, households searching for yield continue to seek out wealth management products and other financial products.

Many internet companies are trying to capitalize on this void in the marketplace and have launched their own internet financial products and services.

As of January 15, Yu E Bao had over 250 billion yuan (about $41 billion) in investment from over 49 million investors, according to Tian Hong, Caixin reported. This makes it the 14th largest money market fund in the world.

Wang Dengfeng, a Tian Hong fund manager, told Caixin's Zhang Bing and Cao Wenjiao that Yu E Bao limits its investments to 29 banks that appear on a safe list. Most of those banks are state-owned banks or joint-stock banks. From the interview:

"We think it is not worth the risk dealing with small banks. It is not that we think they would actually default on loans. But we would like to avoid the risk altogether to be prudent.

"...If the money market goes weak, it is normal for our yields to fall. But it would not happen all of a sudden. Neither do we promise to deliver any rate of returns. Yields are not our primary concern. We are most concerned with risk control."

Sina Corp, Baidu, and Tencent Holdings have also launched their own financial products. Tencent tied its financial product to WeChat, China's most popular mobile messaging service, which was developed by WeChat.

"The new service is no doubt aimed at competing with Alibaba’s service, which was introduced last year," report Grace Zhu and Paul Mozur at the WSJ. "It’s also likely a ploy by Tencent to entice users to link their bank and WeChat accounts. The fund, called Licaitong, offers an impressive 7.3940% seven-day annualized yield, besting Yu’e Bao’s rate by almost 1%."

Now Chinese banks are restricting the amount of money that their clients can put into internet financial services like Li Cai Tong, to avoid a cash crunch, reports WantChina Times. We saw a run up in Chinese money market rates in December, after a severe credit crunch in June of last yea

Before the Lunar New Year holiday, ICBC, the world's largest bank by assets, issued restrictions allowing for just one transfer to Li Cai Tong a day and imposing a 10,000 yuan ($1,600) limit. That limit was then increased modified to 50,000 yuan a month after the holiday and is much lower than the original 300,000 yuan. Ten other banks are also said to have restricted money transfers.

State-owned banks have also been upping interest rates to hang on to clients money. Jack Ma founder of Alibaba previously said someone from outsider the finance industry would need to "stir things up." That's just what seems to be playing out.